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The Hon’ble Chhattisgarh High Court, in the case of Bharat Aluminium Company Ltd vs. Union of India Ors. [WPT No. 94 of 2021 decided on June 24, 2021] has granted stay on Recovery Order passed by the Revenue Department, denying Input Tax Credit (“ITC”) to the Company due to mis-match in two return forms i.e. Form GSTR-2A and Form GSTR-3B, on a condition of deposit of 5% of the demand by the Company.
This writ petition has been filed by Bharat Aluminium Company (“BALCO”/”the Petitioner”) against a notice dated July 1, 2020 and Recovery Order dated January 22, 2021 passed by the Revenue Department (“the Respondent”) denying ITC to the Petitioner, on the basis of mis-matching of ITC availed in Form GSTR-3B with the details furnished by suppliers in Form GSTR-2A for the period 2018-19.
The Petitioner has contended that, there shall not be any automatic reversal of ITC of buyer on non-payment of tax by the seller and in case the seller has not paid the tax, a recovery has to be made from the seller. The Petitioner has come out with the purchases made, but did not tally/match with Form GSTR-2A ITC shown by the seller meaning thereby the seller may not have filed return. When the physical verification was offered to be made by the Petitioner it was not accepted.
Whether the ITC was correctly denied to the Petitioner on the basis of mis-matching of ITC availed in Form GSTR-3B with the details furnished by suppliers in Form GSTR-2A?
The Hon’ble Chhattisgarh High Court in WPT No. 94 of 2021 decided on June 24, 2021 held as under:
Recently, the Hon’ble Madras High Court in M/s. D.Y. Beathel Enterprises v. the State Tax Officer [W.P. (MD) Nos. 2127, 2117, 2121, 2152, 2159, 2160, 2168, 2177, 2500, 2530, 2532, 2534, 2538, 2539, 2540, 2503 & 2504 of 2021 & Ors., dated February 24, 2021] had quashed the assessment order passed by the officer levying the entire tax liability on the purchasing dealer without involving the Seller, where the payment of tax has been made, but tax has not been remitted to the government, by the Seller on the ground that Revenue Department had not initiated any proceedings against the sellers in the first place for non-payment of tax.
The Court observed that, the Respondent has not taken any recovery action against the Seller. When it has come out that the Seller has collected tax from the Petitioner, the omission on the part of the Sellers to remit the tax must have been viewed very seriously and strict action ought to have been initiated against the Sellers.
It was held that, the omission on the part of the Seller to remit the tax should have been viewed very seriously and strict action ought to have been initiated against them. It was further held that, if there was no movement of the goods, the examination of Sellers became more necessary and imperative. However, the Revenue Department did not ensure the presence of Sellers in the enquiry even when the Petitioners insisted on the same. Hence, the order passed by the Revenue Department suffers from certain fundamental flaws. The Court then condemned the action of Revenue for not confronting the sellers and inaction against them in this regard.
To know more, kindly watch our video on “No relevance of GSTR 2A or 2B for availing GST ITC” by CA Bimal Jain at: https://www.youtube.com/watch?v=J1AwdviY-LY
Section 42 of the CGST Act
“Matching, reversal and reclaim of input tax credit-
Provided that the amount of interest to be credited in any case shall not exceed the amount of interest paid by the supplier.
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